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Price of Gold Fundamental Daily Forecast – Rebound in Euro Should Be Supportive for Prices

By:
James Hyerczyk
Published: Feb 14, 2019, 11:21 UTC

The direction of the gold market on Thursday will once again be determined by trader reaction to the U.S. Dollar’s movement against a basket of major currencies. The dollar is currently losing ground to the Australian and New Zealand Dollars and the Euro. If this trend continues then the dollar index should soften, underpinning gold prices.

Comex Gold and U.S. Dollar

Gold is trading lower on Thursday as the rise in the U.S. Dollar continues to weigh on demand for the safe-haven asset. Today’s early price action has put the market in a position to challenge a series of key support levels at $1307.10, $1306.40 and $1306.30. The chart pattern clearly indicates the way of least resistance is down, given that it’s not going to take much to trigger sell-stops under $1306.30.

At 10:57 GMT, April Comex gold is trading $1308.70, down $6.40 or -0.49%.

Confusion Over U.S. Consumer Inflation Data

Yesterday’s volatility in the gold market was fueled by trader interpretation of U.S. Consumer Inflation data. Early in the session, gold was trading higher because of the weaker U.S. Dollar. Profit-taking and the lifting of safe-haven hedges were weighing on the greenback. This was enough to drive up investor demand for gold.

However, gold hit its high for the session and broke to a new low for the day before closing lower after the release of the U.S. Consumer Inflation Index report for January. The whip-saw action in the gold market was likely fueled by different interpretations of the report.

CNBC interpreted the inflation report as soft, saying it raised expectations that the Federal Reserve will pause rate hikes this year. The financial news organization wrote “U.S. consumer prices were unchanged for a third straight month in January, leading to the small annual increase in inflation in more than 1-1/2 years, which could allow the Federal Reserve to hold interest rates steady for a while.”

However, U.S. Dollar traders looked beyond the headline CPI number and reacted to the Core CPI data. This report was bullish for the dollar and bearish for gold prices. It showed strength in core U.S. inflation by rising 2.2 percent for a third straight month.

Daily Forecast

The direction of the gold market on Thursday will once again be determined by trader reaction to the U.S. Dollar’s movement against a basket of major currencies. The dollar is currently losing ground to the Australian and New Zealand Dollars and the Euro. If this trend continues then the dollar index should soften, underpinning gold prices.

The Aussie Dollar is important to watch because it represents a proxy for the Chinese economy. Therefore, it will be affected by news about U.S.-China trade relations. The Euro is critical because it represents about 58% of the value of the dollar index. A strong recovery in the Euro should drive the U.S. Dollar sharply lower. This would be bullish for gold prices.

In the U.S. on Thursday, look for a potential reaction to the Core Retail and Retail Sales reports. Core retail sales are expected to come in flat. Retail Sales are expected to post a modest gain of 0.1%.

U.S. producer inflation or PPI is expected to have risen 0.1% and Core PPI by 0.2%. Weekly Unemployment Claims are expected to come in at 225K, down from the previously reported 234K.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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